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MEMBERSHIP INTEREST PURCHASE AGREEMENT

LLC Membership Agreement

MEMBERSHIP INTEREST PURCHASE AGREEMENT | Document Parties: ARGAN, INC | CURTIN LAW ROBERSON DUNIGAN  SALANS, PC | GEMMA POWER SYSTEMS CALIFORNIA, INC | GEMMA POWER SYSTEMS, LLC | GEMMA POWER, INC You are currently viewing:
This LLC Membership Agreement involves

ARGAN, INC | CURTIN LAW ROBERSON DUNIGAN SALANS, PC | GEMMA POWER SYSTEMS CALIFORNIA, INC | GEMMA POWER SYSTEMS, LLC | GEMMA POWER, INC

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Title: MEMBERSHIP INTEREST PURCHASE AGREEMENT
Governing Law: Delaware     Date: 12/14/2006
Industry: Misc. Capital Goods     Sector: Capital Goods

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

By and Among

 

ARGAN, INC.

 

and

 

GEMMA POWER SYSTEMS, LLC

 

and

 

GEMMA POWER, INC., and

GEMMA POWER SYSTEMS CALIFORNIA, INC.

 

and

 

WILLIAM F. GRIFFIN, JR. and JOEL M. CANINO

 

 

 

Table of Contents

 

 

 

 

 

Page

 

INTRODUCTORY STATEMENT

 

 

1

 

 

 

 

 

 

DEFINITIONS

 

 

1

 

 

 

 

 

 

SECTION 1 - ACQUISITION OF MEMBERSHIP INTERESTS  

 

6

 

1.1

 

 

Acquisition of Membership Interests

 

 

6

 

1.2

 

 

Organizational Documents, Management

 

 

7

 

 

 

 

 

 

 

 

 

SECTION 2 - CONSIDERATION

 

 

7

 

2.1

 

 

Consideration

 

 

7

 

2.2

 

 

Payment of Consideration; Adjustment of Consideration

 

 

7

 

2.3

 

 

Consideration Allocation

 

 

9

 

2.4

 

 

Registration

 

 

9

 

 

 

 

 

 

 

 

 

SECTION 3 - CLOSING

 

 

9

 

3.1

 

 

Closing, Deliveries into Escrow

 

 

9

 

3.2

 

 

Deliveries by Escrow Agent

 

 

10

 

 

 

 

 

 

 

 

 

SECTION 4 - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF THE SELLERS AND THE COMPANIES

 

 

10

 

4.1

 

 

Organization, Qualifications and Company or Corporate Power

 

 

10

 

4.2

 

 

Authorization of Agreement

 

 

11

 

4.3

 

 

Membership Interests; Capital Stock

 

 

12

 

4.4

 

 

Financial Statements

 

 

12

 

4.5

 

 

Absence of Changes

 

 

13

 

4.6

 

 

Legal Actions

 

 

14

 

4.7

 

 

Business Property Rights

 

 

14

 

4.8

 

 

Liabilities

 

 

14

 

4.9

 

 

Ownership of Assets and Leases

 

 

15

 

4.10

 

 

Taxes

 

 

16

 

4.11

 

 

Contracts, Other Agreements

 

 

16

 

4.12

 

 

Governmental Approvals

 

 

18

 

4.13

 

 

Lack of Defaults, Compliance with Law

 

 

18

 

4.14

 

 

Employees and Employee Benefit Plans

 

 

19

 

4.15

 

 

Insurance; Bonds

 

 

20

 

4.16

 

 

Labor and Employment Matters

 

 

20

 

4.17

 

 

Brokers and Finders

 

 

20

 

4.18

 

 

Accounts Receivable

 

 

21

 

 

i

 

 

 

4.19

 

 

Conflicts of Interests

 

 

21

 

4.20

 

 

Environmental Compliance

 

 

21

 

4.21

 

 

Ownership of the Ownership Interests

 

 

22

 

4.22

 

 

Absence of Sensitive Payments

 

 

22

 

4.23

 

 

Approval of Transactions; Related Matters

 

 

23

 

4.24

 

 

Withholding

 

 

23

 

4.25

 

 

Amounts Due From Sellers

 

 

23

 

 

 

 

 

 

 

 

 

SECTION 5 - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF PURCHASER

 

 

23

 

5.1

 

 

Organization, Standing, etc

 

 

23

 

5.2

 

 

Authorization, etc

 

 

24

 

5.3

 

 

No Breach or Defaults Caused by Agreement

 

 

24

 

5.4

 

 

Governmental Approvals

 

 

24

 

5.5

 

 

Brokers Fees

 

 

24

 

5.6

 

 

Authorized Shares of Stock

 

 

24

 

5.7

 

 

Capitalization

 

 

24

 

5.8

 

 

Voting Stock

 

 

24

 

5.9

 

 

No Audit

 

 

24

 

5.10

 

 

Net Worth of Purchaser

 

 

25

 

5.11

 

 

Private Offering

 

 

25

 

 

 

 

 

 

 

 

 

SECTION 6 - CONDITIONS TO CLOSING FOR PURCHASER

 

 

25

 

6.1

 

 

Performance of Agreements

 

 

25

 

6.2

 

 

Lack of Material Liabilities

 

 

25

 

6.3

 

 

Financial Statements

 

 

25

 

6.4

 

 

Lack of Defaults

 

 

25

 

6.5

 

 

Material Adverse Change

 

 

25

 

6.6

 

 

Employment Agreements

 

 

26

 

6.7

 

 

Opinion of Counsel

 

 

26

 

6.8

 

 

Compliance Certificate

 

 

26

 

6.9

 

 

Term Life Insurance

 

 

26

 

6.10

 

 

Registration Rights Agreement

 

 

26

 

6.11

 

 

[Intentionally omitted.

 

 

26

 

6.12

 

 

Release from the Sellers; Payment of Amounts Owed by the Seller]

 

 

26

 

6.13

 

 

Certificates; Organizational Documents

 

 

27

 

6.14

 

 

Corporate Filings

 

 

27

 

6.15

 

 

[Intentionally omitted.]

 

 

27

 

6.16

 

 

Release of Buy-Sell Rights

 

 

27

 

6.17

 

 

Third-Party Consents or Approvals

 

 

28

 

6.18

 

 

Escrow Agreement

 

 

28

 

6.19

 

 

Termination of Operating Agreement

 

 

28

 



 

ii

 

 

 

SECTION 7 - CONDITIONS TO CLOSING FOR THE SELLERS

 

28

 

7.1

 

 

Performance of Agreements

 

 

28

 

7.2

 

 

Compliance Certificate

 

 

28

 

7.3

 

 

Registration Rights Agreement

 

 

28

 

7.4

 

 

Employment Agreements

 

 

29

 

7.5

 

 

Term Life Insurance

 

 

29

 

7.6

 

 

Employee Stock Options

 

 

29

 

7.7

 

 

Escrow Agreement

 

 

29

 

 

 

 

 

 

 

 

 

SECTION 8 - TRANSACTIONS PRIOR TO CLOSING

 

 

29

 

8.1

 

 

Taxes

 

 

29

 

8.2

 

 

Books of Record and Account; Inspection

 

 

29

 

8.3

 

 

Insurance

 

 

29

 

8.4

 

 

Entity Existence

 

 

29

 

8.5

 

 

Maintenance of Properties

 

 

30

 

8.6

 

 

Organizational Documents

 

 

30

 

8.7

 

 

Issuances of Ownership Interests

 

 

30

 

8.8

 

 

Declaration of Distributions, etc

 

 

30

 

8.9

 

 

Material Contracts

 

 

30

 

 

 

 

 

 

 

 

 

SECTION 9 - RESTRICTIVE COVENANTS

 

 

30

 

9.1

 

 

Covenant Not to Compete

 

 

30

 

9.2

 

 

Confidentiality

 

 

31

 

9.3

 

 

Non-Solicitation

 

 

31

 

9.4

 

 

Acknowledgment by the Sellers

 

 

32

 

9.5

 

 

Reformation by Court

 

 

32

 

9.6

 

 

Extension of Time

 

 

32

 

9.7

 

 

Injunction

 

 

32

 

9.8

 

 

Survival

 

 

33

 

 

 

 

 

 

 

 

 

SECTION 10 - INDEMNIFICATION

 

 

33

 

10.1

 

 

Indemnification by the Sellers

 

 

33

 

10.2

 

 

No Circular Recovery

 

 

35

 

10.3

 

 

Sellers’ Indemnification Threshold; Cap

 

 

35

 

10.4

 

 

Release of Excess Escrowed Stock

 

 

36

 

 

 

 

 

 

 

 

 

SECTION 11 - TERMINATION

 

 

36

 

11.1

 

 

Termination by Purchaser

 

 

36

 

11.2

 

 

Termination by Sellers

 

 

36

 

 

 

 

 

 

 

 

 

SECTION 12 - DEFAULT

 

 

36

 

12.1

 

 

Events of Default

 

 

36

 

12.2

 

 

Termination by Reason of Event of Default or Failure of a Condition Precedent

 

 

37

 

12.3

 

 

Waiver by Purchaser

 

 

37

 



 

iii

 

 

 

SECTION 13 - MISCELLANEOUS

 

 

37

 

13.1

 

 

Costs

 

 

37

 

13.2

 

 

Attorneys Fees

 

 

37

 

13.3

 

 

Relationships to Other Agreements

 

 

37

 

13.4

 

 

Titles and Captions

 

 

37

 

13.5

 

 

Exhibits

 

 

38

 

13.6

 

 

Applicable Law

 

 

38

 

13.7

 

 

Binding Effect and Assignment

 

 

38

 

13.8

 

 

Notices

 

 

38

 

13.9

 

 

Severability

 

 

39

 

13.10

 

 

Acceptance or Approval

 

 

39

 

13.11

 

 

Survival

 

 

39

 

13.12

 

 

Entire Agreement

 

 

39

 

13.13

 

 

Counterparts

 

 

40

 

13.14

 

 

Securities Matters

 

 

40

 

13.15

 

 

Preparation and Filing of SEC Documents

 

 

40

 

13.16

 

 

Further Assurances

 

 

40

 

13.17

 

 

Tag Along Rights

 

 

40

 

13.18

 

 

Access to Company Records

 

 

41

 

13.19

 

 

Non-Reliance

 

 

41

 

13.20

 

 

Disclaimer

 

 

41

 

 

 

 

 

 

 

 

 

SECTION 14 - ESCROW PROVISIONS

 

 

42

 



 

iv

 

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is made and entered into as of this 8 th day of December, 2006, by and among (i) ARGAN, INC., a Delaware corporation ("Purchaser"), (ii) GEMMA POWER SYSTEMS, LLC, a Connecticut limited liability company ("GPS"), (iii) GEMMA POWER, INC., a Connecticut corporation ("GPS-Connecticut"), (iv) GEMMA POWER SYSTEMS CALIFORNIA, INC., a California corporation ("GPS-California"), and (v) WILLIAM F. GRIFFIN, JR. ("Griffin"), and (vi) JOEL M. CANINO ("Canino," and together with Griffin sometimes hereinafter referred to together as, the "Sellers").

INTRODUCTORY STATEMENT

 

A.   The Sellers own all of the membership interests of GPS (the "GPS Membership Interests").

B.   GPS is engaged in the engineering and construction of power energy systems and also provides consulting, owner’s representative, operating, and maintenance services to the energy market.

C.   GPS-Connecticut and GPS-California are affiliates of GPS and are also engaged in the engineering and construction of power energy systems and also provide consulting, owner’s representative, operating, and maintenance services to the energy market.

D.   The Board of Directors of Purchaser and the managers and members of GPS have approved the acquisition of GPS by Purchaser by acquisition from the Sellers of all of the GPS Membership Interests, upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, for and in consideration of the premises and the mutual representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties do agree as follows:

 

DEFINITIONS

 

The following terms when used in this Agreement shall have the following meanings:

" Accounts Receivable " means accounts receivable, Note due from all sources of the Company, and credits for returned or damaged merchandise.

" Act " shall mean the Securities Act of 1933, as the same has been and shall be amended from time to time.

 

 

 

" Adjusted EBITDA of the Companies " shall have the meaning set forth in Section 2.2(d)(iii) hereof.

" Adverse Consequences " means all material actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and attorneys' fees and expenses, net of all tax savings and insurance proceeds actually received by an Indemnitee with respect to any of the foregoing, but not for any punitive, indirect or consequential damages.

" Argan " shall mean Purchaser, Argan, Inc., a Delaware corporation, with its principal offices located at One Church Street, Suite 401, Rockville, Maryland 20850, and its successors and assigns.

" Argan Per Share Value " shall mean Three and 75/100 Dollars ($3.75) per share, being the same price per share as that paid by investors for Argan Common Stock in connection with the Private Offering.

" Argan Common Stock " shall mean the authorized voting common stock of Argan.

" Business Day " shall mean shall mean any day of the week other than Saturday, Sunday or a day on which banking institutions in either New York, New York, or Washington, D.C., are obligated or authorized by law to close.

" Canino " shall mean Joel M. Canino, a member and manager of GPS and a stockholder,   officer and director of GPS-Connecticut and of GPS-California, and a signatory to this Agreement.

" Canino Employment Agreement " shall mean the employment agreement to be entered into by Canino and the Company pursuant to Section 6.6 below.

 

" Cash Consideration " shall have the meaning set forth in Section 2.2(a) hereof.

" Closing " means the transfer of the Ownership Interests to Purchaser and the payment of the Consideration to the Sellers pursuant to this Agreement.

" Closing Date " means the date of Closing, established under Section 3 of this Agreement.

 

" Closing Date Balance Sheet " means the audited combining and combined balance sheet of the Companies, as at the close of business on the Closing Date, presented on an accrual basis, prepared in accordance with GAAP by the Companies’ Regular CPA.

" Closing Date Financial Statements " shall mean the Closing Date Balance Sheet, together with the related audited combining and combined statement of operations and changes in financial position of the Companies for the period from January 1, 2006   through the close of business on the Closing Date, prepared in accordance with GAAP by the Companies’ Regular CPA, after making all appropriate adjustments required to present same on an accrual basis, using the same accounting methods, historical policies, practices, principles and procedures with consistent classifications, judgments and estimation methodologies as were used in the preparation of the Interim Financial Statements.

 

2

 

 

" Code " shall mean the Internal Revenue Code of 1986, as amended.

" Companies " means Gemma Power Systems, LLC, Gemma Power, Inc., and Gemma Power Systems California, Inc. and all of their respective subsidiaries and affiliates (unless the context clearly indicates otherwise). Each of Gemma Power Systems, LLC, Gemma Power, Inc., and Gemma Power Systems California, Inc. (and all of their respective subsidiaries and affiliates, unless the context clearly indicates otherwise) is sometimes referred to as "a Company ."

" Companies’ Regular CPA " means the accounting firm of Kostin, Ruffkess & Company, LLC, Certified Public Accountants, the Companies’ regular independent certified public accountant.

 

" Confidential Information "   has the meaning set forth in Section 9.2 below.

" Consideration " means the aggregate consideration set forth in Section 2 hereof.

" Contingent Cash Consideration " shall have the meaning set forth in Section 2.2(d)(iii) hereof.

" Contract " means any contract, agreement, obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding, under which any Company has or may acquire any rights, or has or may become subject to any obligation or liability, or by which any Company or any of the assets owned or used by it is or may become bound.

" December 31, 2007 Financial Statements " shall mean the consolidated balance sheets of the Companies as at December 31, 2007, and the related consolidated statements of income, changes in equity, and cash flow for the twelve month period then ended, prepared by the accounting firm of Grant Thornton (or such other accounting firm as is then regularly engaged by Purchaser) , together with the report thereon of said accounting firm, including the notes thereto, prepared in accordance with GAAP, using, to the extent discernable by Grant Thornton or such other accounting firm, the same accounting methods, historical policies, practices, principles and procedures with consistent classifications, judgments and estimation methodologies as were used in the preparation of the Interim Financial Statements.

" Delivery Date "   has the meaning set forth in Section 3.1 below.

 

" Environmental, Health, and Safety Laws " means the United States federal Comprehensive Environmental Response, Compensation and Liability Act of 1990, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended, together with all other laws (including rules, regulations, codes, and judicial decisions thereunder of federal, state, local, and foreign governments and all agencies thereof) concerning pollution or protection of the environment, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or threatened releases of Hazardous Materials into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials.

 

3

 

 

" Escrow Agent " shall mean Curtin Law Roberson Dunigan & Salans, P.C.

" Escrow Agreement " shall mean the escrow agreement in the form of the escrow agreement attached hereto as Exhibit 2.2(b) .

" Escrowed Stock Consideration " shall have the meaning set forth in Section 2.2(b) hereof.

" Extremely Hazardous Substance " has the meaning set forth in Section 401 of the Emergency Planning and Community Right-to-Know Act of 1996, as amended.

" Financial Statements " means collectively (i) the audited balance sheets of the Companies as at December 31 in each of the years 2002 through 2005, and the related audited statements of income, changes in equity, and cash flow for each of the fiscal years then ended, prepared by the Companies’ Regular CPA, together with the report thereon of the Companies’ Regular CPA, (ii) the Interim Financial Statements, and (iii) the Closing Date Financial Statements, including in all cases the notes thereto; all of which have been prepared in accordance with GAAP.

" GAAP " shall mean in accordance with generally accepted accounting principles, consistently applied.  

" GDI " shall have the meaning set forth in Section 4.1(g).

" GPS-California Stock " shall have the meaning set forth in Section 4.21.

" GPS-Connecticut Stock " shall have the meaning set forth in Section 4.21.

" GPS-Hartford " shall mean Gemma Power Hartford, LLC, a Connecticut limited liability company wholly-owned by GPS.

" GPS Membership Interests " has the meaning set forth in the introductory statement.

" GPS Stock Purchase Agreement " shall mean that certain Stock Purchase Agreement by and among Purchaser, GPS-Connecticut, GPS-California, Griffin and Canino to be executed contemporaneously with this Agreement.

 

4

 

 

" Griffin " shall mean William F. Griffin, Jr., a member and manager of GPS and a stockholder,   officer and director of GPS-Connecticut and of GPS-California, and a signatory to this Agreement.  

" Griffin Employment Agreement " shall mean the employment agreement to be entered into by Griffin and the Company pursuant to Section 6.6 below.

" Hazardous Materials " shall include, without limitation, any pollutants or other toxic or hazardous substances or any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste (including materials to be recycled, reconditioned or reclaimed), oil or petroleum flammable materials, explosives, radioactive materials, hazardous waste, hazardous or toxic substances, or related materials, asbestos requiring treatment as a matter of law, or any other substance or materials defined as hazardous or harmful, or requiring special treatment or special handling by any federal, state or local environmental law, ordinance, rule or regulation including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1990, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1901, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901 et seq.), the Occupational Safety and Health Act of 1970 and the regulations adopted and publications promulgated pursuant thereto.

 

" Interim Financial Statements " means the internally generated combining and combined balance sheet of the Companies as at September 30, 2006, and the related internally generated combining and combined statements of income, changes in equity, and cash flow for the nine (9) month period then ended, prepared in accordance with GAAP, after making all appropriate adjustments required to present same on an accrual basis.

" Main Facility Lease " shall have the meaning set forth in Section 4.9(b) hereof.

 

" Material Adverse Change " shall mean any change that is materially adverse to the current business, operations, properties, prospects, assets, or financial condition of any of the Companies, taken as a whole.

 

" Minimum Net Worth " shall have the meaning set forth in Section 2.2(c) hereof.

 

" Net Worth " shall mean the total assets of the Companies less the total liabilities of the Companies as those terms are shown on the Closing Date Balance Sheet.

" Organizational Documents " shall mean (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the articles of organization and the operating agreement of any limited liability company; (c) the partnership agreement and any statement of partnership of a general partnership; (d) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (e) any charter or similar document adopted or filed in connection with the creation, formation, or organization of any entity; and (f) any amendment to any of the foregoing.

 

5

 

 

" Other Stockholders " shall mean the stockholders of GPS-Connecticut other than the Sellers.

 

" Ownership Interests " shall mean all of the outstanding membership interests of GPS and all of the authorized issued and outstanding capital stock of GPS-Connecticut and GPS-California, including all warrants, options, convertible securities or other rights (contingent or otherwise) to purchase or acquire membership interests or stock of the any of the Companies.

" Private Offering " shall mean the private offering of up to 2,900,000 shares of Argan Common Stock to a limited number of sophisticated investors pursuant to Private Offering Stock Purchase Agreement and the Private Offering Escrow Agreement.

" Private Offering Stock Purchase Agreement " shall have the meaning set forth in Section 5.11 hereof.

" Private Offering Escrow Agreement " shall have the meaning set forth in Section 5.11 hereof.

" Project Contract " shall mean any contract entered into by a Company for the engineering and construction of a power energy system.

 " Project Site " shall mean the physical site of projects under the management or control of any of the Companies pursuant to any Project Contract.

"Registration Rights Agreement" shall mean the Registration Rights Agreement executed by the Sellers and Purchaser pursuant to Section 2.4 hereof.

 

" SEC " shall have the meaning set forth in Section 2.4.

" Sellers " has the meaning set forth in the preface above.

" Sellers’ Indemnification Threshold " shall have the meaning set forth in Section 10.3.

 

" Stock Consideration " shall have the meaning set forth in Section 2.2(a) hereof.

 

SECTION 1

 

ACQUISITION OF MEMBERSHIP INTERESTS

 

1.1   Acquisition of Membership Interests . On the Closing Date (as defined in Section 3), and subject to and upon the fulfillment or waiver of the terms and conditions of this Agreement, Purchaser shall   acquire from the Sellers all of the GPS Membership Interests.

 

6

 

 

1.2   Organizational Documents, Management .

(a)   Organizational Documents . At Closing, the Organizational Documents of GPS, and of its wholly-owned subsidiary, GPS-Hartford, shall be amended in the manner determined by Purchaser, as sole member of GPS.

(b)   Management . At Closing, Purchaser, as sole member of GPS, shall take all appropriate action to elect or appoint the person(s) designated on Schedule 1.2(b) as the manager(s) of GPS, and of its wholly-owned subsidiary, GPS-Hartford, until their respective successors are duly elected or appointed and qualified.

 

SECTION 2

 

CONSIDERATION

 

2.1   Consideration .   The total consideration to be paid by Purchaser to the Sellers (the "Consideration") shall be an amount equal to Twenty Million One Hundred Twenty-Five Thousand Dollars ($20,125,000), comprised of Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000) in cash (the "Cash Consideration") and Eight Million Eight Hundred Seventy-Five Thousand Dollars ($8,875,000) in Argan Common Stock (the "Stock Consideration"), subject to adjustment in accordance with Section 2.2(c). The Consideration shall be determined and paid in accordance with Section 2.2.

2.2   Payment of Consideration; Adjustment of Consideration .  

 

(a)   Subject to Section 2.2(c), and except as set forth in Section 2.2(d) below, the Consideration shall be paid at Closing in cash, wire transfer or certified funds in the amount of the Cash Consideration, and through issuance of the number of shares of Argan Common Stock equal in value to the Stock Consideration, such shares valued at the Argan Per Share Value; provided, however, that Purchaser shall retain from the Stock Consideration and not deliver to the Sellers at Closing Argan Common Stock having an aggregate value (valued at the Argan Per Share Value) of Two Million Five Hundred Thousand Dollars ($2,500,000) (the "Escrowed Stock Consideration"), but instead at Closing deposit the Escrowed Stock Consideration in escrow with the Escrow Agent to be held pursuant to the Escrow Agreement described in Section 2.2(b) below. At Closing, the Sellers shall receive their respective pro rata shares of the Cash Consideration and the Stock Consideration (less the Escrowed Stock Consideration) as set forth in Schedule 2.2(a).   

 

(b)   At Closing, Purchaser shall deliver the Escrowed Stock Consideration to the Escrow Agent to be held and/or released pursuant to the terms and conditions of the Escrow Agreement, substantially in form and substance as set forth in Exhibit 2.2(b).

(c)   Notwithstanding anything to the contrary contained in Section 2.2(a), (i) in the event that the Net Worth of the Companies as of the Closing Date, as set forth on the Closing Date Balance Sheet, is less than Four Million One Hundred Thousand Dollars ($4,100,000) (the "Minimum Net Worth"), then such deficiency shall reduce, dollar for dollar, the Cash Consideration paid to the Sellers pursuant to Section 2.2(a) hereof; and (ii) in the event that the Net Worth of the Companies as of the Closing Date, as set forth on the Closing Date Balance Sheet, is greater than the Minimum Net Worth, as set forth on the Closing Date Balance Sheet, then the Cash Consideration paid to Sellers pursuant to Section 2.2(a) hereof shall be increased by the amount by which the Net Worth of the Companies as of the Closing Date, as set forth on the Closing Date Balance Sheet, exceeds the Minimum Net Worth. To enable all parties to determine the Net Worth of the Companies as of the Closing Date, the Sellers shall cause the Closing Date Financial Statements to be delivered to Purchaser on or before January 15, 2007. The Closing Date Financial Statements shall be subject to the Sellers’ and Purchaser’s review. In the event that there is any adjustment to the Cash Consideration pursuant to this Section 2.2(c), the amount by which the Cash Consideration has been reduced, if any, shall be repaid by Sellers to Purchaser, and the amount by which the Cash Consideration has been increased, if any, shall be paid by Purchaser to the Sellers, in either case within two (2) Business Days following the determination of such adjustment.

 

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(d)   Notwithstanding anything to the contrary contained in Section 2.2(a), Two Million Nine Hundred Thousand Dollars ($2,900,000) of the Cash Consideration shall not be paid at Closing, but rather shall be paid as follows:

(i)   Eight Hundred Ten Thousand Dollars ($810,000) of the Cash Consideration shall be paid on or before January 10, 2007;

(ii)   Ninety Thousand Dollars ($90,000) of the Cash Consideration shall be paid on or before April 10, 2007; and

(iii)   Two Million Dollars ($2,000,000) of the Cash Consideration (the "Contingent Cash Consideration") shall be paid if and only if the Adjusted EBITDA of the Companies, as reflected on the December 31, 2007 Financial Statements, is greater than Twelve Million Dollars ($12,000,000), any such amount to be paid at the earlier of: (i) March 31, 2008, or (ii) Purchaser’s receipt of the Escrow Funds following satisfaction of the Escrow Release Conditions, as said terms are defined in and pursuant to the terms and conditions of that certain Second Amended and Restated Financing and Security Agreement, dated December ___, 2006, by and among Purchaser, Bank of America, N.A. and the other parties named therein. Purchaser will not be obligated to pay, and the Sellers will not be entitled to payment of, any portion of the Contingent Cash Consideration if the Adjusted EBITDA of the Companies, as reflected on the December 31, 2007 Financial Statements, is equal to or less than Twelve Million Dollars ($12,000,000). For purposes of this Section 2.2(d)(iii), the "Adjusted EBITDA of the Companies" shall mean earnings of the Companies for the designated period determined in accordance with GAAP, adjusted by adding back all deductions taken in determining such number, if any, for (A) interest expense, (B) income taxes, (C) depreciation, (D) amortization, and (E) corporate overhead of Purchaser allocated to the Companies by Purchaser in the regular course of business. It is understood and agreed that Adjusted EBITDA shall include interest income of the Companies for the designated period.

(e)   In the event that any payment or repayment, as the case may be, of the applicable portion of the Cash Consideration payable under Sections 2.2(c) and 2.2(d) above is not timely made, then the party obligated to pay shall also be liable to the party entitled to payment for interest thereon from the date that such payment was due, in accordance with Section 2.2(c) or Section 2.2(d), as the case may be, until paid at an annual rate equal to the sum of (i) the Prime Rate as published in the Money Rates section of The Wall Street Journal on the Business Day prior to the date such payment was due, and (ii) five percent (5%); and for all costs to enforce payments under said Sections 2.2(c) or 2.2(d), as the case may be, including reasonable attorneys’ fees.

 

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2.3   Consideration Allocation . Before the Closing, Purchaser and the Sellers shall negotiate in good faith to determine that portion of the Consideration and other relevant amounts allocable to the Sellers’ covenant not to compete in Section 9.1.   The parties shall prepare and file their respective tax returns consistent with the reporting requirements of Sections 1060.   The parties shall take no positions contrary thereto in any tax return, tax contest or other tax filing or proceeding. If any tax authority challenges such allocation, the party receiving notice of such challenge shall give the other prompt written notice thereof and the parties shall cooperate in order to preserve the effectiveness of such allocation.

2.4   Registration . Purchaser shall prepare and file a registration statement or similar document in compliance with the Act with respect to Stock Consideration (and the GPS-Connecticut Stock Consideration and the GPS-California Stock Consideration, as said terms are defined in the GPS Stock Purchase Agreement) as soon as practicable following Sellers’ delivery of the Closing Date Balance Sheet. Thereafter, Purchaser shall use its commercially reasonable efforts to obtain from United States Securities and Exchange Commission (the "SEC") the declaration or ordering of effectiveness of such registration statement or document. Such registration will permit the Sellers, as holders of Argan Common Stock, to sell shares of Argan Common Stock at their discretion, subject to applicable law. Stock certificates issued as part of the Consideration shall be accompanied by any documents necessary to permit the transfer agent to transfer shares of Argan Common Stock as directed by the Sellers. At the Closing Purchaser shall execute and deliver to the Sellers a Registration Rights Agreement in the form attached hereto as Exhibit 2.4.

 

SECTION 3

 

CLOSING

 

3.1   Closing; Deliveries into Escrow . The closing of the acquisition of the GPS Membership Interests (the "Closing") shall take place on a date designated by Purchaser in a notice given to the Sellers that shall be not earlier than one (1) Business Day nor later than five (5) Business Days following the execution of this Agreement, the Stock Purchase Agreement, and of all documents contemplated under this Agreement and under the Stock Purchase Agreement, and placement thereof, together with all other documents or items to be delivered by the parties at Closing under this Agreement and under the Stock Purchase Agreement (including those items described in Sections 3.2 and 3.3 below) into escrow with the Escrow Agent (the "Delivery Date") (subject to satisfaction or waiver by the parties of their respective conditions to Closing set forth in Sections 5 and 6, other than such conditions that by their nature must be satisfied with the Closing), or at such other time, date and place as Purchaser and the Sellers may agree (the "Closing Date").

 

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3.2   Deliveries by Escrow Agent . At or before 2:00 p.m. on the Closing Date, Purchaser shall initiate a wire transfer of immediately available funds in an amount equal to the Cash Consideration (other than the portion thereof to be paid following Closing in accordance with Section 2.2(d)) to an account or accounts to be designated by the Sellers, such designation to be made no later than the Delivery Date. Upon confirmation from either of the parties that said wire transfer of funds has been effected, the Escrow Agent shall be authorized, and hereby agrees, to date as of the Closing Date all documents held by it in escrow which, in accordance with the terms of this Agreement, are to be dated as of the Closing Date and to deliver, and the Escrow Agent shall release from escrow and deliver, (i) to the Sellers stock certificates representing the Stock Consideration described in Section 2, the Registration Rights Agreement, and all other documents and instruments received by it which, in accordance with the terms of this Agreement, are to be delivered by Purchaser to the Sellers at Closing, and (ii) to Purchaser duly endorsed certificates or other evidences of ownership representing all of the GPS Membership Interests together with such other customary documents as may be required to transfer same, and all other documents and instruments received by it which, in accordance with the terms of this Agreement, are to be delivered by Purchaser to Sellers at the Closing.

SECTION 4

 

REPRESENTATIONS, WARRANTIES AND CERTAIN

COVENANTS OF THE SELLERS AND THE COMPANIES

 

As a material inducement to induce Purchaser to consummate the transactions contemplated under this Agreement and under the GPS Stock Purchase Agreement, but subject to the limitations set forth in Section 10 below, each of the Sellers and the Companies represent and warrant that each of the matters set forth in this Section 4 is true and correct as of the date hereof (or, in the case of the Closing Date Financial Statements to be provided hereafter in accordance with the following provisions of this Section 4 below, will be true and correct as of the Closing Date),   and acknowledge that Purchaser’s entry into this Agreement and the GPS Stock Purchase Agreement and the performance of its obligations hereunder and thereunder are made in reliance upon the completeness and accuracy of each of the matters set forth herein. The representations and warranties being made by the Companies shall survive up and until the Closing Date. The representations and warranties being made by the Sellers shall survive as set forth in Section 13.11 below.

4.1   Organization, Qualifications and Company or Corporate Power .

 

(a)   GPS is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Connecticut. Attached as Schedule 4.1(a) is a list of all states in which GPS is qualified to do business. GPS is duly qualified as a foreign limited liability company in each other jurisdiction in which qualification is required.

 

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(b)   GPS-Connecticut is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Connecticut. Attached as Schedule 4.1(b) is a list of all states in which GPS-Connecticut is qualified to do business. GPS-Connecticut is duly qualified as a foreign corporation in each other jurisdiction in which qualification is required. On or before the Closing Date GPS-Connecticut will file IRS Form 2553 "Election by a Small Business Corporation" in which it elects to be treated as an S corporation pursuant to applicable provisions of the Code.

(c)   Gemma Power Hartford, LLC ("GPS-Hartford") is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Connecticut. Attached as Schedule 4.1(c) is a list of all states in which GPS-Hartford is qualified to do business. GPS-Hartford is duly qualified as a foreign limited liability company in each other jurisdiction in which qualification is required. All of the membership interests of GPS-Hartford are owned by GPS.

(d)   GPS-California is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California. Attached as Schedule 4.1(d) is a list of all states in which GPS-California is qualified to do business. GPS-California is duly qualified as a foreign corporation in each other jurisdiction in which qualification is required. GPS-California has duly elected status, and qualifies as of the date of this Agreement, as an S corporation pursuant to applicable provisions of the Code.

(e)   Each of GPS and GPS-Hartford has the limited liability company power and authority, and each of GPS-Connecticut and GPS-California has the corporate power and authority, to own and hold its properties and to conduct its businesses as currently conducted and as proposed to be conducted, and to execute, deliver and perform this Agreement, the GPS Stock Purchase Agreement, and all other agreements and instruments related hereto or contemplated hereby to which such Company is a signatory.

(f)   Except as set forth on Schedule 4.1(f), none of the Companies owns of record or beneficially, directly or indirectly, (i) any shares of outstanding capital stock or securities convertible into capital stock of any other corporation, or (ii) any participating interest in any partnership, joint venture, limited liability company, or other non-corporate business enterprise.

(g)   Gemma Development, Inc. ("GDI") is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.

4.2   Authorization of Agreement.   The execution, delivery and performance by each of the Companies of this Agreement, the GPS Stock Purchase Agreement, and any other instruments or documents required to be executed and delivered hereby, have been duly authorized by all requisite limited liability company or corporate action, as the case may be, and will not (a) violate any applicable provision of law, any order, writ, injunction, decree, judgment, or ruling of any court or other agency of government, the Articles of Organization or the Operating Agreement of GPS or GPS-Hartford, the Articles of Incorporation or Bylaws of GPS-Connecticut or GPS-California, or any provision of any indenture, agreement, insurance policy, bond or other instrument by which any of the Companies, or any of their respective properties or assets, are bound or affected, (b) conflict with, result in a material breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, insurance policy, bond, agreement or other instrument, (c) result in being declared void, voidable or without   further binding effect any license, governmental permit or certification, employee plan, note, bond, mortgage, indenture, deed of trust, franchise, lease, contract, agreement, or other instrument or commitment or obligation to which any of the Companies is a party, or by which any of the Companies, or any of their respective assets, may be bound, subject or affected, or (d) except as otherwise provided in this Agreement, result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever not arising in the ordinary course of business upon any of the properties or assets of any of the Companies .

 

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4.3   Membership Interests; Capital Stock . The membership interests of GPS and GPS-Hartford and the authorized capital stock of GPS-Connecticut and GPS-California and the holders of the issued and outstanding shares of such capital stock are set forth in Schedule 4.3 hereto. Except as disclosed in Schedule 4.3, there is no (i) subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any membership interests or shares of any class of capital stock of any of the Companies, which is authorized or outstanding, (ii) none of the Companies has any commitment to issue any membership interests, shares, warrants, options or other such rights or to distribute to holders of any membership interests or any class of its capital stock any evidence of indebtedness or assets, (iii) none of the Companies has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any membership interests or shares of its capital stock or any interest therein or to pay   any dividend or make any other distribution in respect thereof, and (iv) none of the Companies has any obligation or commitment to register under the Act any securities issued or to be issued by it. All of the outstanding membership interests and all of the issued and outstanding shares of the capital stock of the Companies, as the case may be, have been validly issued in compliance with all federal and state securities laws and are fully paid and non-assessable.

4.4   Financial Statements . The Companies have delivered the Financial Statements to Purchaser (or with respect to the Closing Date Financial Statements will timely deliver same to Purchaser in accordance with the terms of this Agreement). Subject to the provisions of the Disclaimer set forth in Section 13.20 of this Agreement, the Financial Statements are, or   will be, as the case may be, true, complete and correct, have been, or will be, as the case may be, prepared in accordance with GAAP and fairly present the financial condition of the Companies as of such respective dates   and the results of operations for the respective periods then ended   after making, with respect to the Interim Financial Statements and the Closing Date Financial Statements, all appropriate adjustments required to present such Financial Statements on an accrual basis. Except as or as will be set forth in such Financial Statements,   or as incurred in the ordinary course of business, to the knowledge of the Sellers and the Companies, the Companies have no material obligation or liability, absolute, accrued or contingent, except contingent liabilities as set forth in the Contracts disclosed pursuant to Section 4.11 below, and obligations and liabilities which do not adversely affect the business, property or assets of the Companies.  

 

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4.5   Absence of Changes . Except as listed in Schedule 4.5 and since the time period covered by the Interim Financial Statements, none of the Companies has:

(a)   Transferred, assigned, conveyed or liquidated any of its assets or entered into any transaction or incurred any liability or obligation which affects the assets or the conduct of its business, other than in the ordinary course of business;

(b)   Incurred any Material Adverse Change, or become aware of any fact, circumstance, occurrence or event which could reasonably be expected to result in a Material Adverse Change;

 

(c)   Suffered any material destruction, damage or loss relating to its assets or the conduct of its business whether or not covered by insurance;

(d)   Suffered, permitted or incurred other than in the ordinary course of business the imposition of any lien, charge, encumbrance (which as used herein includes, without limitation, any mortgage, deed of trust, conveyance to secure debt or security interest) whether or not contingent in nature, or claim upon any of its assets, except for any current year lien with respect to personal or real property taxes not yet due and payable;

(e)   Committed, suffered, permitted or incurred any default in any liability or obligation of the Company;

(f)   Made or agreed to any change in the terms of any contract or instrument to which it is a party, other than change orders as occur in the regular course of business in connection with any Project Contract;

(g)   Knowingly waived, canceled, sold or otherwise disposed of, other than in the ordinary course of business, for less than the face amount thereof, any claim or right relating to its assets or the conduct of its business, which it has against others;

(h)   Declared, promised or made any distribution from its assets or other payment from the assets to its members or shareholders, as the case may be (other than reasonable compensation for services actually rendered and pre-closing distributions of cash to Griffin and/or Canino in their capacity as the sole members of GPS, provided same does not result in the failure of the Companies to meet the Minimum Net Worth requirement as set forth in Section 2.2(c)), or issued any additional membership interests, shares or rights, options or calls with respect to its membership interests or shares of capital stock, or redeemed, purchased or otherwise acquired any of its membership interests or shares, or made any change whatsoever in its capital structure;

(i)   Paid, agreed to pay or incurred any obligation for any payment for, any contribution or other amount to, or with respect to, any employee benefit plan, or paid or agreed to pay any bonus or salary increase to its executive officers or directors, or made any increase in the pension, retirement or other benefits of its managers, directors or executive officers other than in the ordinary course of business;  

 

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(j)   Committed, suffered, permitted, incurred or entered into any transaction or event other than in the normal course of business which would increase its liability for any prior taxable year;

(k)   Incurred any other liability or obligation or entered into any transaction other than in the ordinary course of business; or

(l)   Received any notices of, or has reason to believe, that any of its customers or clients have taken or contemplate any steps which could disrupt its business relationship with said customer or client or could result in the diminution in the value of the business of the Company as a going concern.

4.6   Legal Actions . Except as listed on Schedule 4.6, there is no action, suit, investigation, or proceeding pending or, to the knowledge of the Companies or the Sellers, threatened against or affecting the Sellers, any of the Companies, or any of their respective properties or rights, before any court or by or before any governmental body or arbitration board or tribunal and no basis exists for any such action, suit, investigation or proceeding which will result in any material liability or affirmative or negative injunction being imposed on any of the Companies or the Sellers. The foregoing includes, without limiting its generality, actions pending or threatened involving the prior employment of any employees or prospective employees of any of the Companies, or their use, in connection with their respective businesses, of any information or techniques which might be alleged to be proprietary to its former employer(s). In addition, no action, suit, investigation or proceeding has been brought against any of the Companies or the Sellers relating to any claims relating to the presence or effect of Hazardous Materials in any design or construction project or other matter in which any of the Companies or the Sellers have been involved.

4.7   Business Property Rights . To the best of each of the Companies’ or each of the Seller’s knowledge, no person or entity has made or threatened to make any claims that the operations of the businesses of the Companies are or will be in violation of or infringe on any technology, patents, copyrights, trademarks, trade names, service marks (and any application for any of the foregoing), licenses, proprietary information, know-how, or trade secrets ("Business Property Rights"). To the best of each of the Companies’ or each of the Seller’s knowledge, no third party is infringing upon or violating any of the Companies’ Business Property Rights and each of the Companies has the exclusive right to use the same. None of the employees, directors, officers, members or shareholders of any of the Companies has any valid claim whatsoever (whether direct, indirect or contingent) of right, title or interest in or to any of the Companies’ Business Property Rights.

4.8   Liabilities . Except as listed in Schedule 4.8, to the knowledge of the Sellers and the Companies, none of the Companies has any liabilities or obligations, whether accrued, absolute, contingent or otherwise (individually or in the aggregate), which are of a nature required to be reflected in financial statements prepared in accordance with GAAP, including without limitation any liability which might result from an audit of its tax returns by any appropriate authority, except (i) the liabilities and obligations set forth in the Financial Statements delivered or to be delivered in accordance with Section 4.4, and (ii) liabilities and obligations incurred for the purpose of enabling the Companies to conduct their normal business (in each case in normal amounts and incurred only in the ordinary course of business). Except as disclosed in the Financial Statements (or to be disclosed in the Closing Date Financial Statements), to the knowledge of the Sellers and the Companies, none of the Companies is in default with respect to any liabilities or obligations and all such liabilities or obligations are shown and reflected in the Financial Statements (or will be shown and reflected in the Closing Date Financial Statements), and such liabilities incurred or accrued subsequent to the Companies’ incorporation, have been, or are being, paid or discharged as they become due, and all such liabilities and obligations were incurred in the ordinary course of business.

 

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4.9   Ownership of Assets and Leases .

 

(a)   Attached hereto as Schedule 4.9(a) is a complete and correct list and brief description, as of the date of this Agreement, of all real property and material items of personal property owned by the Companies and all of the long term capital leases and other agreements relating to any real, personal or intangible property owned, used, licensed or leased (other than term leases of equipment entered into in connection with any Project Contract) by the Companies or any of them. Each of the Companies has good and marketable title to all of its assets, including those listed on Schedule 4.9(a), and any income or revenue generated therefrom, in each case free and clear of any liens, claims, charges, options, rights of tenants or other encumbrances, except (i) as disclosed and reserved against in the Financial Statements (to the extent and in the amounts so disclosed and reserved against), (ii) for liens arising from current taxes not yet due and payable, and (iii) as separately and specifically set forth on Schedule 4.9(a). Each of the aforementioned leases and agreements of the Companies is in full force and effect and constitutes a legal, valid and binding obligation of the Company and the other respective parties thereto, enforceable in accordance with its terms, except as enforceability may be limited by applicable equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to time in effect affecting the enforcement of creditors’ rights generally, and there is not under any of such leases or agreements existing any default of any of the Companies or, to the best of the Companies’ or each   Seller’s knowledge, of any other parties thereto (or event or condition which, with notice or lapse of time, or both, would constitute a default). None of the Companies has received any notice of violation of any applicable regulation, ordinance or other law with respect to its operations or assets and, to the best of the Companies’ and the Sellers’ knowledge, there is not any such violation or grounds therefor which could adversely affect any of the Company’s assets or the conduct of its business. None of the Companies is a party to any contract or obligation whereby an absolute or contingent right to purchase, obtain or acquire any rights in any of the assets has been granted to anyone. There does not exist and will not exist by virtue of the transactions contemplated by this Agreement any claim or right of third persons which may be legally asserted against any asset of the Companies.

(b)   GPS’s main facility, located at 2461 Main Street, Glastonbury, Connecticut 06033 (the "Main Facility"), is leased by GPS pursuant to that certain Lease dated October 5, 1999 by and between Glastonbury Bank and Trust Company, as Lessor, and Gemma Power Systems, LLC, as Lessee, which lease was amended pursuant to an Amendment to Lease dated as of the ____ day of July, 2000, a Second Amendment to Lease, effective April 1, 2004, and a Third Amendment to Lease, effective November 1, 2005, a true, correct and complete copy of which lease, and all amendments and modifications thereof (the "Main Facility Lease"), has been provided by the Sellers to Purchaser.

 

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4.10   Taxes . The Companies have paid, or made provisions for the payment of, all taxes due, assessed and owed by them, if any, as reflected on their respective tax returns and have timely filed all federal, state, local and other tax returns which were required to be filed and which were due prior to the Closing Date, except for those taxes set forth on Schedule 4.10(a). All federal, state, local, and other taxes of the Companies accruable since the filing of such returns have been properly accrued on the respective books of each of the Companies. No federal income tax returns for any of the Companies have ever been audited by the Internal Revenue Service or any state or local taxing authority, except as described in Schedule 4.10(b). No other proceedings or other actions which are still pending or open have   been taken for the assessment or collection of additional taxes of any kind from any of the Companies for any period for which returns have been filed, and to the Companies’ and the Sellers’ knowledge, no other examination by the Internal Revenue Service or any other taxing authority affecting any of the Companies is now pending. Except for those taxes set forth on Schedule 4.10(a), taxes which any of the Companies were required by law to withhold or collect subsequent to the formation or incorporation of the Companies have been withheld or collected and have been paid over to the proper governmental authorities or are properly held by the Companies for such payment and are so withheld, collected and paid over as of the date hereof. No waivers of statutes of limitations with respect to any tax returns of any of the Companies, nor extensions of time for the assessment of any tax, have been given by any current employees of any of the Companies. There are not, and there will not be, any liabilities for federal, state or local income, sales, use, excise or other taxes arising out of, or attributable to, or affecting either the assets or the conduct of the business of any of the Companies through the close of business on the Closing Date for which Purchaser will have any liability for payment. After the Closing, there does not and will not exist any liability for taxes resulting from the conduct of the business of any of the Companies through the close of business on the Closing Date, which may be asserted by any taxing authority against the assets of any of the Companies, or the operation of any of their businesses (which liability is not reimbursable pursuant to "pass-throughs" under the Companies’ existing Project Contracts), including without limitation any liability arising from disallowance of any S corporation election by any of the Companies, and no lien or other encumbrance for taxes will attach to such assets or the operation of their businesses. The Sellers agree to give Purchaser immediate notice of any claim or assertion by the Internal Revenue Service, or any other taxing authority, of any such disallowance.

4.11   Contracts, Other Agreements .

(a)   Attached hereto as Schedule 4.11(a) is a complete and accurate list, and Sellers have delivered to Purchaser true and complete copies, of:

(i)   each Contract that involves performance of services or delivery of goods or materials by or to one or more of the Companies of an amount or value in excess of $5,000,000, including without limitation Project Contracts and other contracts, subcontracts and agreements for the provision or prospective provision by any Company of engineering, design, procurement, construction, consulting, operation, maintenance or other services;

 

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(ii)   each Contract that was not entered into in the ordinary course of business and that involves expenditures or receipts of one or more Companies in excess of $500,000;

(iii)   each employment agreement, consulting agreement, or agreement providing for severance payments that obligates or could obligate one or more Companies to make payments in excess of $100,000 per annum;

(iv)   each joint venture, partnership, and other Contract (however named) involving a sharing of profits, losses, costs, or liabilities by any Company with any other person or entity;

(v)   each Contract containing covenants that in any way purport to restrict the business activity of any Company or any affiliate of a Company or limit the freedom of any Company or any affiliate of a Company to engage in any line of business or to compete with any person or entity; and

(vi)   each Contract providing for payments to or by any person or enti


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